Globally, the first three months of 2012 brought with it little new momentum. The Eurozone’s debt debacle remained at the forefront of the global economic agenda, several critical elections were on the horizon (Russia, France, Greece) and Asia’s highly-effective cooling measures showed no sign of being relaxed.

Against this backdrop some luxury buyers took to the side-lines to observe their market’s trajectory, Knight Frank said.

Nicholas Holt, Knight Frank’s Asia-Pacific research director, said the overall index is likely to remain subdued in 2012 fluctuating between marginal price falls and rises.

“It seems unlikely we are on the cusp of a new deflationary cycle in luxury global house prices,” he said.

Last month, Jones Lang LaSalle said residential property prices in Dubai had bottomed out, reaching prices not seen since early 2008.

Villa sales increased three percent in the first quarter of 2012, compared to a peak in the third quarter of 2008, but prices still remain 25 percent lower, the firm said in its quarterly Dubai real estate market overview.

Apartment sales in the emirate also started to stablise in the first three months of the year, but prices remain low, down 34 percent compared to 3Q 2008, JLL said.

Property prices in Dubai soared after the city opened its real estate sector to foreign investors in 2002, granting them freehold ownership rights at many developments.

From start-2007 to mid-2008, prices rallied almost 80 percent, Morgan Stanley estimates showed, with billions of dollars worth of new projects launched by local developers.

But home prices in Dubai suffered the biggest reversal seen in the Gulf property market as result of the financial crisis, declining on average 60 percent.